Cowboy Subdivision Railroad Sale
Request for Proposals
May 19, 2016
OFFICIAL RFP DOCUMENT Page 1
Disclaimer
This Request for Proposals (“RFP”) is available to parties that are interested in participating in the statutory competitive process for the proposed sale of the Cowboy Subdivision Railroad (“Cowboy Sub” or “the Line”).
No representations, warranties, liability or offer
The Oklahoma Department of Transportation (“ODOT”, “the Department”, “we” or “us”) has prepared this RFP to provide preliminary information on the Cowboy Subdivision Railroad to interested parties. The Oklahoma Department of Transportation does not give any warranty or make any representations, expressed or implied, as to the completeness or accuracy of the information contained in this document or any information which may be provided in connection with it.
The Oklahoma Department of Transportation expressly disclaims any and all liability relating to or resulting from the use of such information by any interested party or other third party in the preparation of any subsequent proposal.
This RFP does not constitute an offer to sell or negotiate. The Department reserves the right, in its sole discretion, to reject all proposals submitted in response to this RFP.
By accepting this RFP, the recipient agrees to be bound by the foregoing limitations.
No liability for costs
The Oklahoma Department of Transportation shall have no obligation to pay or reimburse any interested party for costs incurred in preparing and responding to this RFP.No Proposer is entitled to any compensation pursuant to this RFP.
ODOT rights
ODOT reserves its rights with respect to this RFP including, but not limited to, the unqualified right, at any time and in its sole discretion, to change, modify or terminate this RFP.
No party receiving this RFP (including any potential Proposer) shall have any rights against ODOT relating to this RFP. ODOT makes no representations, warranties, or guarantees that the information contained in this RFP is accurate, complete, or timely or that such information accurately represents the conditions that would be encountered during the performance of any subsequent contract if an RFP or other solicitation is issued relating to the Transaction. The furnishing of the information in this RFP shall not create or be deemed to create any obligation or liability upon ODOT.
The Department reserves the right to reject any submitted proposal or Proposer related to this RFP.
Ownership of Submitted Materials
All materials submitted in response to this RFP shall become the property of ODOT and will not be returned.
If certain components of the communications with the Department or in the Proposals are deemed confidential or proprietary, the Proposers must indicate the parts they would like to keep confidential. ODOT will keep such information confidential to the extent permitted under the Oklahoma Open Records Act, 51 O.S. 24A.1, et seq.
Table of Contents
1.Introduction
1.1Overview
1.2Cowboy Sub RFP Objectives
1.3Statutory Process and Considerations
1.4Proposer Eligibility
1.5Proposer Communication Protocol
2.Selection Process and Schedule
2.1Description of the Selection Process
2.2Phase I:Non-Binding Proposals
2.3 Phase II: Binding Proposals
2.4 Timetable
3.Request for Proposals Submission Requirements
3.1 Price and Financial Proposal (Part A)
3.2 Business Proposal (Part B)
3.3Questions and Clarifications
3.4 Binding Proposals
4.Conditions of Sale
5.Forms
6.Data and Attachments
OFFICIAL RFP DOCUMENT Page 1
1.Introduction
1.1Overview
The Oklahoma Department of Transportation invites interested parties (“Proposers”) to provide responses to this RFP for the proposed sale of the Cowboy Sub a 22-mile segment of railroad between Pawnee Junction, Oklahoma and Stillwater, Oklahoma (“the Line”). As noted in the map below, the Cowboy Sub includes the rail line between Milepost 8.46 in Pawnee Junction, Oklahoma and Milepost 30.79 in Stillwater, Oklahoma, consisting of all track structures and associated rights-of-way and all appurtenances thereof and including but not necessarily limited to rail and fastenings, switches and frogs, ties, ballast, roadbed, embankment, other structures or things necessary for support of operations.
Source: State of Oklahoma Official Railroad Map
In 1998, the State of Oklahoma (“State”) purchased the Cowboy Sub from the Burlington Northern Santa Fe RailwayCompany (now BNSF Railway Company, “BNSF”) (Attachment 1). The purchase was part of an asset preservation effort by the State to save as many rail lines as possible from being abandoned and dismantled after several Class I railroad companies were declared bankrupt or merged, and subsequently disposed of excess rail lines. Upon purchase of the Cowboy Sub, the Department sought short line operators to lease the line in an effort to keep the Cowboy Sub operational. The Department entered into a “Track Lease and Operating Agreement” with Stillwater Central Railroad Inc. (Watco Companies), in 1998, allowing it to operate on the line.
The Department entered into an amended Track Lease and Operating Agreement (the “Track Lease”) with Stillwater Central Railroad, LLC dated as of January 1, 2013 (Attachment 5). The Track Lease is scheduled to expire on December 31, 2017, unless terminated earlier, or extended, in accordance with the terms of the Track Lease.The line serves the communities of Stillwater and Glencoe and currently serves three customers and transports various types of cargo:
1)National Standard is a producer of welded wire, tire bead wire and other industrial wire products. It ships wire rods that are used in making rail cars.
2)Stillwater Millproduces animal feeds and ships grain on the Cowboy Sub (wheat, corn, soybeans, milo etc.)
3)J.M. Huber transports limestone to be used in manufacturing ceramics.
Total average rail car volume on the line for the period 2009 - 2014 was 640 cars per year.
1.2Cowboy Sub RFPObjectives
The Department is considering the sale of the Cowboy Sub in order to meet the following goals and objectives:
- Increased economic activity throughout the State of Oklahoma through increased volume growth, tax revenues, job creation through the sale of the Cowboy Sub to a private operator.
- Sustaining rail access to the communities served by the Line and surrounding area.
- Enhanced customer service, development opportunities and new customer creation along the Cowboy Sub line.
1.3Statutory Process and Considerations
The Department is issuing this RFP and sales process (“Process”) in accordance with the Railroad Revitalization Act contained in 66 O.S. §§304 (A) et seq. (“Act”).(Attachment 2)
The Process, as provided in 66 O.S. § 304(A)(4) will consist of the following:
- The Department will initiate a RFP.
- The Department will conduct an evaluation of all submitted proposals.
- The Oklahoma Department of Commerce will prepare an economic impact study based on each Proposer’s Business Plan. The economic impact studies will be considered in addition to the evaluation of each Proposal as described in Section 2.2.5.
- Recommendations from the Cabinet Secretaries of the Oklahoma Departments of Transportation, Finance, Commerce, Agriculture and Energy (“Steering Committee”) will be provided to the Department and the Transportation Commission.
- The Transportation Commission will receive and consider the recommendation of the Steering Committee and will be responsible to determine if the sale of railroad assets within its jurisdiction is in the best interests of the State of Oklahoma, and for authorizing the sale of such assets.
Further description of the selection and evaluation components of the Process is included in the Act and this RFP.
1.4Proposer Eligibility
A Proposer must be an owner (i.e. individuals, co-partnerships, associations, corporations, companies, transportation companies, public service corporations or fund) of one or more operating railroads and/or have a minimum of five years of experience operating a common carrier railroad authorized by, and subject to the jurisdiction of the United States Surface Transportation Board (“STB”) or its predecessor the Interstate Commerce Commission. If the Proposer does not meet the minimum experience mentioned in the preceding sentence, then Proposer must be a subsidiary of, or under common control with, a railroad that meets such qualifications.
To participate in the RFP process and to submit a proposal as outlined in this RFP, Proposers will need to submit Form A “Proposer Eligibility” prior to any Proposer participating in the RFP process.Form A documents must be submitted to the receipts of the form, the Department will contact proposers to confirm their eligibility in a timely fashion.
The Department will determine Proposer eligibility using the information requested on Form A.If a Proposer team has more than one party, a Form A must be filled out for each entity of the Proposer Team.The Department has the right to request additional information prior to the Department’s determination of the Proposer’s eligibility.
1.5Proposer Communication Protocol
Once a Proposer’s eligibility has been confirmed as per Section 1.4, all eligible Proposers will adhere to the communication protocol outlined below to guide interactions between the Department and the eligible Proposers.
Point of Contact
ODOT will not accept telephone or oral requests. All communication with eligible Proposers regarding this Request for Proposals will be conducted via email directed to the Proposer’s designated lead contact. All communication will be conducted from email address (“Point of Contact”). It is the Proposer’s responsibility to receive and periodically validate the receipt of all related correspondence. No requests for additional information or clarification to any person other than the Point of Contact will be considered.
Access to RFP Information
An official version of the RFP and Attachments and any RFP addendums can be found via this web link:
In addition to posting procurement documents, this web link will also contain a repository for all commonly available and public question and answer (“Q&A”) dialogue or other key communications from the Department.
Planned Interactive Communication Opportunities
The Department intends to offer opportunities to eligible Proposers to facilitate eligible Proposer due diligence and Proposal formulation.These opportunities include:
- Industry day forum to allow eligible Proposers to receive verbal briefings about the Cowboy Sub and a site tour of the Cowboy Sub line.
- One-on-one discussions to allow more direct conversations to discuss confidential and proprietary information as well to advance negotiation exchanges.
- Written Q&A through the noted web link to facilitate clarifications around the RFP or due diligence activities.Additional information regarding the Q&A process is provided in Section 3.3.
More detailed information about these interactive communication opportunities will be made available to eligible Proposers at a later time.
Further Discussions
ODOT reserves the right, at its sole discretion, to conduct further discussions with one or more Proposers after Non-Binding Proposals and, separately, Binding Proposals to this RFP are due.An opportunity to participate in such discussions, if any, will be communicated separately to Proposers. In the event discussions are held in connection with this RFP, ODOT reserves the right to require a non-disclosure agreement (“NDA”) from all parties.
OFFICIAL RFP DOCUMENT Page 1
2.Selection Process and Schedule
2.1Description of the Selection Process
The Department will solicit interest from eligible proposers through a competitive public saleprocurement process.The following two-phase process has been developed in accordance with the Department’s statutory authority as described in the Act and in Section 1.3:
1)Phase I:Non-Binding Offer Proposal (“Non-Binding Proposal”), and
2)Phase II: Final Binding Offer Proposal (“Binding Proposal”)
The below graphic illustrates a high-level summary of the two-phase process that will be used to review and evaluate proposals, and ultimately, award and close with the Preferred Proposer.
Phase I features a Non-BindingProposal in which Proposers will prepare a proposal document which does not bind the proposer but rather establishes a contractual negotiating framework between the Proposer and the Department as both teams work toward a definitive Binding Proposal. Through this Non-Binding Proposal, the eligible Proposer expresses an interest in acquiring the Cowboy Sub, outlines an operating plan, discusses economic impacts and commits to a good faith price to negotiate all while ensuring the confidentiality of the process.
A summary of the Non-Binding Proposal process is outlined in Section 2.2. The Non-Binding Proposal submission requirements are located in Section 3.
Subject to the receipt of qualified Proposals, the Department will review each Non-Binding Proposal and it intends to shortlist up to two Proposers for further negotiation and proceeding to the Phase II Binding Proposal process.
More information about Phase II Binding Proposals is included in Section 2.3. An RFP addendum will be issued by the Department governing the BindingProposal process will be issued at a later stage.The BindingProposalwill represent an advanced binding proposal that that will provide the Department a final (firm) offer, information on committed financing anda comprehensive redline mark-up of the indicative Term Sheet.
More detailed information about each phase of the RFP is discussed in the following sections.
2.2Phase I:Non-Binding Proposals
2.2.1Proposer Due Diligence
After the RFP is issued by the Department,Proposers will be able toreviewdue diligence data for analysis, which will be distributed publicly through the Department’s noted web link in Section 1.5.The Department will also arrange for anIndustry Day and one-on-one meetings.
Furthermore, there will be a question and answer (“Q&A”) period that will commence from the issuance of this RFP and will end seven days before Non-Binding Offer Proposal Due Date.
Form A must be received and a determination of Proposer eligibility must be made by the Department before any Proposer will be able to the participate in the due diligence activities including Q&A, industry days, review of Cowboy Sub data and other communications with the Department.
It will be up to the Proposer during the due diligence period to explore with the operator the manner and terms on which Proposer will be able to obtain access to the intrastate rail network.
2.2.2Proposer Submission Requirements
The Proposal submission guidelines and response requirements are discussed in detail in Section 3.
2.2.3Minimum Offer Price
To ensure the Department’s objectives are met and to create a competitive proposal environment, the Department has determined a minimum price that must be met or exceeded in order for a Proposal to be considered (“Minimum Offer Price”). If any Proposal does not meet or exceed the Minimum Offer Price that proposal will be determined to be non-compliant and will not be scored. The Minimum Offer Price is $5,000,000.
2.2.4Non-Binding Offer Proposal Deadline
Per the Act, the Department will allow 90 days after the RFP is issued for a Proposer to submit its Non-Binding Proposal.The deadline to receive Non-Binding Offer Proposals is 3 P.M. CDTon August 17, 2016.
2.2.5Evaluation of Non-Binding Proposals
The Department may select up to two Proposals received from all qualified Proposers. Non-Binding Proposals will be ranked based on which provide the“best value”as determined by qualitative and quantitative factors, including the required Business Plan and Projected Economic Activity and the Offer Price. Non-Binding Proposals will be evaluated and scored as follows:
- Offer Price (40 Points) as per Section 3.1
a)Proposer's Offer Price will be scored as a percentage of the highest Offer Price received by the Department.
b)Scoring Formula = Proposer's Offer Price / highest Offer Price * 40 points.
c)For example, if Proposer's Offer Price is 14 and the highest Offer Price is 18, the Proposer's score would be calculated as follows: 14 / 18 * 40 = 31 (out of a maximum of 40 points).
d)If the minimum Offer Price is not met the Proposal will not be considered.
- Business Plan and Projected Economic Activity (60 points)
Responses to the questions provided in Section 3.2 will be evaluated, qualitatively, and will be scored on a scale of 0 to 60. Proposers should provide sufficiently comprehensive answers to each question to enable a proper evaluation of the Business Plan and Projected Economic Activity through Form B.
Each component score will be added together to form the Proposer’s score. Based on the evaluation of the Proposals, the Department intends on shortlisting up to two Proposers for further negotiation and the Binding Proposal phase as described in Section 2.3 of this RFP.
2.3Phase II:Binding Proposals
After the Department shortlists Proposers, it will issue an addendum to this RFP governing the Binding Proposal process.
Highlights of theBinding Proposal and negotiation process are presented below:
- Before BindingProposals are received, preliminary negotiations will commence with each shortlisted Proposer to facilitate discussions and modifications that may be necessary for Proposers to provide a BindingProposal and to establish a more comprehensive sale terms.
- All Binding Proposals mustinclude necessary updatesto the Proposer’s Non-Binding Proposal as presented in the RFP addendum that will be shortlisted Proposers.to provide information on committed financing (if necessary), a final (firm) offer price ("Final Offer Price"), comprehensive red line mark-up of the Term Sheet of the Department’s sale terms and conditions, an updated business plan that lists the projected economic activity for review and consideration by the Department of Commerce, and a bid security of $500,000.
- The Binding Proposals must remain open until accepted or rejected by the Department after a determination of the Transportation Commission, with closing being subject to possible statutory and STB approvals, and negotiation of a definitive purchase and sale agreement.
- The BindingProposals will be reviewed by the Department and the Steering Committee to determine the best value for the State.
- The Proposer that provides the best value proposal ("Preferred Proposer") will be recommended by the Steering Committee to the Transportation Commission within the 90 days of the RFP Closure (when Non-Binding Proposals are due).
- The Transportation Commissionwill be responsible to determine if the sale of Cowboy Sub is in the best interests of the State of Oklahoma.
- If a determination is rendered by the Transportation Commission that the sale of the Cowboy Sub is appropriate, the Transportation Commission will authorize the sale of the Cowboy Sub and the Department will then commence final negotiations with the Preferred Proposer. The final negotiation process will be subject to breakage fees (to be defined by the Department at a later time) if a transaction is not completed.
- If the Preferred Proposer is unable to successfully negotiate a satisfactory final agreement with the Department, the Department reserves the right to invite the second ranked Proposer to negotiate as the new Preferred Proposer with the Department.
The Preferred Proposer will complete the commercial and financial close process, including executing the sales agreement and paying the negotiated purchase price to the Department.The Preferred Proposer must also satisfy statutory requirements for the sale of the Cowboy Sub, including all required State approvals and briefings, and any necessary approvals of the STB.After all requirements have been satisfied and the transfer of the Cowboy Sub is made to the Preferred Proposer, the Preferred Proposer will be referred to as the “Purchaser”.